The world has entered into a new era so has
banking. The customers want cost effective financial products,
attractive return and excellent services but security of funds remains
the top most concern. Even in Pakistan commercial banks are no longer
confined to four-walls and the edge in technology plays a key role.
Yet another important feature which cannot be overlooked by the
management of any commercial bank is the extent of branch network,
proximity to the customers, particularly for the rural population.

Muslim Commercial Bank (MCB) falls under the
category of 'big five' domestic commercial banks. It was privatized in
early nineties and since then has been going through major
restructuring programme. Now it is well positioned to reap the benefit
of a leaner operating base. The decline in provisioning requirements,
revamped treasury and improved balance sheet strength have a positive
impact on net profit after tax, which has registered persistent
increase on year to year basis. It has not only benefited its
customers but also helped the GoP in further divesting its share in
the Bank.

MCB has been engaged in extensive management and
operational restructuring to streamline its operations and to achieve
cost efficiencies. A commendable feature is that unlike other public
sector banks, which received assistance from Asian Development Bank to
the tune of US$ 250 million, MCB carried out restructuring at its own
initiative and without financial assistance from the government.

While complete restructuring of the bank's
operations was a costly and lengthy process, MCB is now in a position
to have greater control over administrative expenses. During this
process more than 1,600 employees were released under a golden
handshake scheme costing approximately two billion rupees and 110
branches were closed down. The continued drive to recover
non-performing loans (NPLs) coupled with prudent credit appraisal
policies have helped in reducing further provisioning requirement.

MCB has been able to demonstrate strong earning
momentum despite declining interest rates by focusing on loan book
growth, efficient utilization of funds and declining NPLs. Despite a
less than proportionate reduction in return paid on deposits, MCB has
been able to retain its net interest income by enhancing its lending
to small and medium size retail clients.

The other reason MCB has been able to maintain
margins in the face of declining return on government securities, was
its asset mix management. The bank moved away from government
securities and grew its loan book. The spurt came in year 2000, when
credit offtake by the private sector was quite large as the
manufacturing sector underwent BMR and consumer credit began picking
up.

The government's efforts to bring down average
lending interest rates poses a challenge to commercial banks
particularly smaller banks. However, an extensive branch network
coupled with its market standing, has enabled MCB to not only retain
its market share but bolster its deposit base. As the private sector
credit demand is expected to pick up, net advances are also
anticipated to increase.

An important contributor to total revenue of a bank
is trade finance activity. With a change in the composition of foreign
trade, the pie is unlikely to become bigger. While the smaller banks
may potentially be threatened because the big five will be able to
exploit their franchise to retain their share. MCB's fee-based income
is strongly linked with the volume of international trade between
Pakistan and rest of the world.

MCB is probably one of the first local bank to
extensively explore the opportunities prevailing in the consumer
banking area. At present it has the largest ATM network in Pakistan.
The launch of MCBswitch allows other banks to utilize MCB's ATM
network. All MCBswitch members are able to use ATMs worldwide through
Mastercard's international Cirrus network.

MCB has also entered into other consumer financing
products which include: personal loan, auto financing and house
financing scheme Pyra Ghar. This aims at catering to three
different needs namely home purchase, home renovation and home
construction. While the large MCB branch network makes it convenient
for customers, its real strenth is attractive rate on interest.

MCB was able to retain its position as the
undisputed market leader in Rupee Traveller Cheques by achieving sale
of over Rs 152 billion during calendar year 2000. Besides the
designated branches of MCB four other banks, Bank AL Habib, Faysal
Bank, PICIC Commercial Bank and ABN Amro Bank, are involved in the
sale of these cheques.

To conclude, it may be said that MCB is a full
service bank with a strong franchise value. Yet efforts are being made
to achieve new levels of excellence. MCB has a distinct edge over the
others due to its sheer size which allows it to cater to the needs of
large corporates as well as smaller businesses and individuals.